The Central Bank of Kenya (CBK) is now looking into increasing its gold reserves as part of a strategy to reduce reliance on the US dollar and diversify its foreign exchange holdings.
This was confirmed by CBK Governor Kamau Thugge in an interview with Bloomberg during the International Monetary Fund (IMF) and World Bank Spring Meetings.
Governor Thugge explained that the CBK has already formed a special team to assess the feasibility of buying more gold.
He confirmed that the idea is under serious consideration, although he did not provide specific details on when the purchases might begin.
“We have basically a group that is looking at the feasibility of doing it and yes, that’s something that we’re actively considering,” Thugge told Bloomberg during the event.
According to the Central Bank’s most recent annual report, as of the end of June, Kenya held gold worth about Ksh169 million (approximately $1.3 million).
This represents around 600 ounces, or nearly 20 kilograms. Kenya had sold off most of its gold reserves in 1998, and since then, its holdings have remained minimal, as noted by the International Monetary Fund.
Globally, central banks and investors are buying more gold, which has driven its price to an all-time high.
This global rush to acquire gold started in early 2024 and has been fueled by several factors, including economic uncertainties, geopolitical tensions, and the increasing desire to move away from overdependence on the US dollar.
Additionally, some countries are now using gold to settle trade transactions, making it more attractive.
Currently, gold is the best-performing major commodity in the world. The price of one ounce of gold has jumped to about $3,302 (Ksh428,467), reflecting a surge of over 40 percent.
The growing demand is largely driven by fears of sanctions, global economic instability, and efforts by central banks to protect their economies from foreign currency risks.
When comparing gold to other reserves, Kenya’s gold holdings appear very small. As of November 2024, Kenya had total foreign exchange reserves of around $9.6 billion (Ksh1.2 trillion).
This means that gold makes up less than 0.016 percent of the total reserves—an extremely low proportion.
This overreliance on the US dollar and a single foreign currency exposes the Kenyan economy to risks, especially from fluctuations in exchange rates.
By adding more gold, Kenya hopes to create a more stable and diversified reserve portfolio that can better withstand global financial shocks.
Governor Thugge also touched on other financial matters, including the upcoming loan from the International Monetary Fund. He mentioned that Kenya will receive a new IMF loan by the end of the year, and it will be similar in size and structure to the previous one.
“The concessional element of the funds and the policy package attached to them makes it a good package in the current context of elevated global risks,” Thugge stated.
He further noted that the IMF program, along with a Eurobond that Kenya issued last month, will help the country avoid taking more loans in the near future.
“The nation isn’t planning or expecting to go to the international capital markets for a while, following a Eurobond issue last month that helped it rearrange some debt,” Thugge said.
He also pointed out that Kenya has a strong and deep local financial market that can be relied upon to help finance the national budget.
In addition, the government is exploring alternative funding sources, such as loans from Middle Eastern countries.
By considering gold as part of its reserve assets, the Central Bank of Kenya aims to strengthen the country’s financial stability while preparing for future economic uncertainties.
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